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Senate panel floats new Oregon budget proposal

SALEM, Ore. (AP) -- An Oregon Senate committee took a small step Thursday toward increasing tax revenue and decreasing public-employee pension benefits, but it was unclear if the latest proposals will have the momentum to make it into law.

The Senate Finance and Revenue Committee heard public testimony but did not advance anything to the full Senate. Sen. Ginny Burdick, the Portland Democrat who leads the committee, said she wasn't sure when the committee might take action.

The latest proposal would raise about $200 million over the next two years for schools, colleges, senior services and mental health care. It would increase cigarette taxes and corporate tax rates while limiting access to tax exemptions and a tax deduction for seniors' medical expenses.

It would also save money on public-employee pensions, primarily by cutting even deeper into annual inflation increases that were already decreased earlier this year.

Gov. John Kitzhaber backed the proposal, telling the committee that the plan provided an opportunity to reduce the costs of public services and provide more revenue long into the future.

"Even as the economy recovers it's not good enough to offset the deep disinvestment, particularly in public education, that we made during the Great Recession," Kitzhaber said.

The state's most active business lobbying groups supported the proposal, saying they could live with higher taxes if they were accompanied by reductions in pension costs for state and local governments.

Public employees and labor unions reacted angrily, saying the plan would take money that seniors are counting on after years or decades of hard work for the government.

"It is time to stop taking away from this essential part of the American dream, that when you work hard and play by the rules you can retire into financial security," said Rob Sisk, president of the Service Employees International Union. "Especially when that is a promise that has been made to you."

Workers contend that cuts in their retirement benefits would be an unconstitutional breech of a contract they have with the state, and retirement changes are certain to be challenged to the state Supreme Court.

Mary Botkin, a longtime lobbyist for the American Federation of State, County and Municipal Employees was blunt: "We'll see you in court," she said.

Earlier this year, Democrats resisted Republican calls for steep cuts in benefits in the Public Employees Retirement System, instead passing a bill that trimmed annual inflation adjustments on a graduated scale that affected primarily higher-income retirees. The first $20,000 of a retiree's income would continue increasing by 2 percent a year, but income beyond that would grow more slowly.

The proposal unveiled Thursday would cut inflation adjustments to 1.25 percent a year for all income under $60,000, and to 0.15 percent for incomes beyond that threshold.

Lawmakers also looked at several options for scaling back one particularly costly method of calculating pension payments known as the "money match." The proposals would only affect inactive members of the pension system, who have left their government job but not yet started collecting their pension.

Collectively, changes to inflation adjustments and the money match would save state and local governments about $900 million over the next two years.

Thursday's committee hearing is the most concrete action yet toward a much-debated budget deal, but it still faces a rocky path.

Tax increases would require at least two Republican votes, and Senate GOP leader Ted Ferrioli of John Day said Republicans were not involved in crafting the latest Democratic proposal.

Likewise, the House has not been involved in negotiations. Democratic Speaker Tina Kotek, D-Portland, has fought hard to avoid pension cuts for lower-income retirees, though her spokesman, Jared Mason-Gere, said she's pursuing an agreement that would include additional cuts to inflation adjustments beyond those already enacted.

A minority of House Democrats would support further pension cuts, but only if Republicans will provide the votes necessary to increase revenue, said Rep. Val Hoyle of Eugene, the No. 2 Democrat.